Withholding true costs harms Claremont’s water plan

April 05, 2013 12:36 PM

By Cruz Sembello

Since 2006, the California Alliance to Protect Private Property Rights has been California’s leading private property rights organization. Last year, we learned about efforts in Claremont to promote an eminent domain takeover of Golden State Water Company’s local system.

We sent the city of Claremont a letter requesting that they provide information that would justify the use of eminent domain for this purpose.

Local news outlets have also asked for information only to be told that the city does not provide background information of this kind. To this day, any benefit from Claremont’s plan remains a mystery.

In a recent Inland Valley Daily Bulletin article, a Claremont city council member was quoted to have said that public ownership “may eventually” lead to lower rates. That cloudy description, and the lack of disclosure, suggests the city’s lack of confidence in a plan that, even if feasible, will also face expensive and significant legal challenges.

Nonetheless, city officials march at taxpayer expense towards public ownership of Golden State Water. Claremont has been spending on lawyers and consultants and made an unsolicited $54 million offer to buy the water company. This multi-million dollar commitment was made without any explanation of how the city would pay for it or any analysis of how this government expansion could impact other city services.

The only publicly available research suggests that a takeover will subject residents to hundreds of millions of dollars in debt and would cause water rates to increase.

At the request of Golden State Water Company, Rodney T. Smith, a nationally-renowned and locally-based water economist, conducted a financial study and released the results. The study concludes that Claremont residents would face at least a 30 percent increase in water rates—$462 more annually per household than what is currently charged —if the city acquires and operates the system.

The study also shows that the 30 percent increase is a best-case scenario based on the city’s $54 million offer for the water system. The final price is almost certain to be much higher. For example, Mr. Smith demonstrated that a $104 million price tag, which would not be surprising, would result in a 71 percent rate increase water rates ($1,103 annually per customer).

Recently, our organization sent a mailer to survey Claremont residents. Over the course of a few weeks and by a margin of 3 to one, Claremont residents expressed opposition to a takeover. The strong and immediate response was telling. Those opposed to the plan don’t understand the rationale for seizing a water company if it will not immediately guarantee lower water costs.

For people who base decisions on facts and figures, they refuse to support a plan that lacks transparency and a demonstrated benefit.

Naturally, there were also emotional responses from people frustrated with the current cost of water service. Claremont is not alone, and the problem isn’t limited to private providers.

According to a USA Today analysis, frustration with rising water bills is a national issue as water rates are on the rise throughout California and the US. In fact, water rates have doubled in one in 4 municipalities surveyed.

Several publicly-owned water systems in California have increased rates over 100 percent, including San Diego (nearly 150 percent) and San Francisco (over 200 percent). Sadly, the increasing cost of government regulations, infrastructure improvements, post 9-11 security measures, and public employee pensions and health care costs are driving up water costs for government water systems all over the US.

If Claremont acquires Golden State water system, they too will have to contend with this costly reality.

Changing the name on the door of the water company won’t change the fact that the cost to maintain and sustain service is increasing. Instead of a costly eminent domain fight, local government would be better served to try and work with Golden State Water Company to address these issues jointly, with community involvement.

Taxpayers won’t have to pay hundreds of millions to repay bonds. Instead, they can invest in reliable, quality water for current and future generations.

Cruz Sembello is a member of the board of directors of the California Alliance to Protect Private Property Rights.